Why do people prefer to rent than own just because of money?

[VYBerlinaV8]

I've always viewed renting as a short to medium term option. My wife and I rented for 3 years before we were able to buy.

That said, how people spend money is up to them. Sometimes people ask my advice as to whether they should do/buy something, and I simply tell them to be aware of the cost of their choice, especially the opportunity cost.

Over the past few years, I've started to relax a bit about spending on lifestyle, as my investment based wealth and income have both risen. For example, I have spent $110k on cars and holidays in the last two years, and made the decisions with my eyes and mind open. Yes, I could have paid off my house, no I don't regret doing these things for one second.

Bottom line, if someone wants to rent, be my guest. Just have a think about the bigger picture, rather than makiing excuses.

 

[The Y-man]

. The inability to paint your house purple and yellow just because you want to kills me and I would rather pay through the nose for a mortgage than ever rent again. The possibility of settling into a home and being asked to leave after 12 months because the owner is selling etc etc...

Some people are so busy with work, reno'ing, looking for new props, or relaxing by going out that really the only time they use their abode is to sleep and have a shower.....


These days we need our patch of dirt because it feeds us.... (moving 15 fruit trees etc is not really easy...)

The Y-man

 

[james_w]

I have rented where I want to live and bought where it made investment cents

it makes sense to buy where you get good returns for our current strategy

and it's not where we want to live.

 

[hobo-jo]

Cheaper? Perhaps yes if you only compare this years rent with this years mortgage repayments. But a homeowners repayments reduce every year as they pay off the mortgage. Your repayments increase every year as rents rise with inflation. At some point the costs will cross over and you will be paying more than the homeowner who buys today. When the homeowner retires he will have a fully paid off asset and live the rest of his life rent free. You will have to still have to fund ever increasing rent payments from your retirement fund and have no asset to pass on to your kids.

You are assuming that the renter has not deployed their capital into a better performing asset with the intention to buy property when prices are better. Im sure Im in the minority of renters, but I was talking about my situation and I am currently in a much better financial position from selling and renting the last 20 months than if Id held...

 

[Aaron_C]

I would be more interested hearing where they made their money rather than where they store it. How many of Australias rich list made their wealth via residential property?

You only become filthy rich from doing business. Property can make you filthy rich through development - but that's basically a business anyway.

 

[Fifth]

You are assuming that the renter has not deployed their capital into a better performing asset with the intention to buy property when prices are better. Im sure Im in the minority of renters, but I was talking about my situation and I am currently in a much better financial position from selling and renting the last 20 months than if Id held...

Over at the enemy's camp (***********), there are a few such souls. Their reasoning is perfectly sound (rent for half the price or less of buying, save and invest the difference, buy at a more opportune time). Still, I'm amazed at the rents some of them are prepared to pay. To me, spending 700 pw on rent seems an outrageous waste of money and I couldn't care less if the owner is making a measly 2% return. Even if I could afford 700 pw (which I couldn't), I could never justify 'lifestyle renting'. I'd rather buy a dump and save and invest the difference.

EDIT: haha I'm not allowed to say the B word

 

[INVSTOR]

I rented for the first time ever earlier this year for 6 months. It felt really inhumane to me and I wondered the same thing. I ended up having to get my parents to look after one of my dogs as it was too hard to find a rental with 2 dogs. We had a particulary bad experience though as the property hadn't been lived in for years and not many things worked. The owners dad would come and do maintenance whenever he wanted without prior notice till I kicked up about it. I also don't like that the owners can spray chemicals around the yard whether you like it or not. I much prefer my own place where we can grow our own veges and do what we like. I'm a pretty easy going landlord and I have a lot more respect for my tenants than the lack of respect I was given while renting. Most of my tenants have asked to rent off my again after moving out of my properties. I can understand why now.

 

[VYBerlinaV8]

I rented for the first time ever earlier this year for 6 months. It felt really inhumane to me and I wondered the same thing. I ended up having to get my parents to look after one of my dogs as it was too hard to find a rental with 2 dogs. We had a particulary bad experience though as the property hadn't been lived in for years and not many things worked. The owners dad would come and do maintenance whenever he wanted without prior notice till I kicked up about it. I also don't like that the owners can spray chemicals around the yard whether you like it or not. I much prefer my own place where we can grow our own veges and do what we like. I'm a pretty easy going landlord and I have a lot more respect for my tenants than the lack of respect I was given while renting. Most of my tenants have asked to rent off my again after moving out of my properties. I can understand why now.

Treating your tenants like valued clients is a good way to nurture the landlord/tenant relationship. It means people tend to look after properties better, and your tenant turnover is lower.

Of course, there are some landlords out there who are real dicks.

 

[Ideo]

I own some property.

I rent in Sydney.

I refuse to pay over the top amounts to live in an area which is a liveable commute from work and is well serviced by public transport.

I am, however, sensible in what I rent, it is a small outlay which is worth it for bette quality of life from not wasting hours a day commuting. When you work long hours, that makes a difference.

 

[wylie]

Most of my tenants have asked to rent off my again after moving out of my properties. I can understand why now.

We have a previous tenant who has called me three times now over the past year looking for another house to rent (or the same one they rented before). I think they wish they had not moved back to their own home, because they are having trouble finding something suitable. I'm not sure how many houses they think we have access to

 

[wobbycarly]

I have rented where I want to live and bought where it made investment cents

it makes sense to buy where you get good returns for our current strategy

and it's not where we want to live.

Freudian slip? Or deliberate pun? Well done!

 

[Indifference]

Of course I do. We just happened to have a 6c Ford before the 4c Audi. I know Fords are cheaper to maintain (having had one) but as per the home buying situation. I like Audis SO much more therefore the higher price doesn't matter cause not everything is about money.

Exactly... and for some of us, we don't care about being able to paint the wall in a house a different colour.... home ownership can be a hinderance to life experience. You can't buy experience, you have to live it.

If your home becomes a "shackle", causing resistance to opportunities further afield, then what is the REAL cost???

I sold the PPOR last year in Melbourne & moved the family to the USA. We rent now & plan to do the same some day when we wander back to Aust. For us, living life, taking opportunities & having experiences others dream of is a simple reality. Renting allows us the freedom to do that. I really couldn't care less what the wall colour is, which microwave is in the house etc... it is just arbitrary "stuff" that sustains that which is more important.... actually living life & experiencing the world rather than reading about it.....

We actually feel that we have more freedom now & have made a conscious decision to continue on this path for the foreseeable future. Sure, we will buy another PPOR some day, but for now we are getting on with the important stuff.

 

[RumpledElf]

But a homeowners repayments reduce every year as they pay off the mortgage. Your repayments increase every year as rents rise with inflation.

Only if you have a loan that is structured like that.

Our loan payments were initially set as 30% of our income and index each year with inflation. Nothing whatsoever to do with interest rates, so if rates go up our payments still stay the same and it is possible to have periods where the loan balance goes up.

Quite a novel approach, but you can't tar all home loans with the same brush.

 

[hobo-jo]

Good point RE. I also recall a bank (west?) recently bragging interest only options for firt home buyers...

 

[RumpledElf]

There's a mob in WA as well that does loans tailored for low income as well as the one in SA, so I wouldn't be surprised if that's the one you mean and that they all do similar repayment schedules.

They hauled us over hot coals and back via the hell of 3 years of proof of income to give our our loan and we're paying half of it out in the first few months of having the loan. We should be able to knock the other half off in 1-2 years. Our deposit was well over $70k. And yet, no other bank would touch us because we're high risk.

Stupid new credit rules.

 

[Aaron_C]

Stupid new credit rules.

That were supposed to protect you

 

[RumpledElf]

Still beats renting though for all the usual reasons. Got to choose our own floorplan/colours (obviously - its a new build), can do anything we want with the garden, can have a dog/cat/chickens/elephant out back if we want, already knew all the neighbours (on all three sides plus across the road - and they're all nice), can run a business from home with no questions from a landlord, and we've already stuck heaps of picture hooks in the walls

Costs us more than renting for these last few days we have two mortgages, but when you own you can get creative about paying the thing off fast and not be stuck with payments for the next 30 years/lifetime. If our current job keeps up - which I suspect it will since I'm back on line now the youngest kid is FINALLY weaned - our mortgage is around 0.5x our income, which is why I'm a bit pissed it was so hard to get this loan. Guess that's what you get for trying to do house stuff when the earner in the couple is firmly glued to a baby instead of earning.

Must say its interesting to be selling our old house to someone we already know. Pre-approved neighbours

BTW have I ever mentioned how nice it is to be paid standard Sydney subcontractor rates with not a single Sydney level expense? I hours work pays the week's mortgage and the other 19 hours a week of work are free to spend! hehehe

 

[BayView]

I don't know that most people "prefer" to rent.

Most people rent because they have to; it's a financial necessity for most, unless you are the person who is renting while the PPoR is being built.

Most people that I know want their own home, and for most people this is the closest thing to investing they will ever do other than their Employer Contribution super. - so they never actually invest.

In their case it is better that they buy than rent, because most will simply spend the diff between what their rent is, and what their mortgage would be, and never become financially well off.

 

[Graemsay]

I rent, but I'd prefer to buy. My reasons are really the same as given by Hobo-Jo, with Shadow's editing, namely it's cheaper and more flexible.

I'd add a third, which is that it's a method of shorting the housing market. As a nasty Doom and Gloomer, I think that prices are high, and that they should be lower in a few years...

Of course I have been proven completely wrong on this so far.

I agree with the sentiment that over the long term it's better to own, and I've said before that short of a prolonged Japanese style slump, the cross-over point is around about 15 years. If you can buy and hold a house for that long then you should come out ahead even if the market collapses in the interim.

 

[goonandtell]

I have a love hate relationship with renting ...

I love
The savings, seriously i live in an apartment on southbank with crazy body corp fees that is falling apart after just 7 years of being built, we pay less than 600 per week and the palce is worth 650k?
The ability to share, the dynamic of sharing in a rental is much better than sharing in a place you own there is no landlord/tenant issues its more even.
The flexibility, after i sold my place i rented a massive place with 4 other people in the suburbs with a pool, bar, home theater, gym ... now i rent a smaller inner city apartment on the top floor such a dramatic change in lifestyle was a few forms and bond lodgement.

I hate
The fact you can't do anything, our place is crying for more storage, the robes are shelf + rail when it should be shelves and multi rail, the laundry needs some built in shelves and the kitchen should all be draw units. and beige carpet in a rental really, REALLY?!!?
The insecurity, the last place after i left the owner decided they wanted to put there kids in the place so didn't renew.
The fact it never feels like home.
Treatement by property managers

I am happy to keep renting for a few more years but the very patient girlfriend is starting to suggest the next purchase will be a PPOR.